As it happens, I bank with the CBA. After ten years of silence, yesterday it called me twice about my mortgage. Different people!
The calls were couched as a courtesy service but were, in effect, begging me to demand a larger discount on my home loan rate.
We know the reason why:
Weeks of work goes into scripting the opening statement that Commonwealth Bank chief executive Matt Comyn gives to the bank’s investor briefings.
…So, when Comyn used last week’s December-half earnings presentation to effectively declare Australia’s mortgage market had become irrational, with loans being written below the industry’s cost of capital, he knew exactly what he was doing.
“The home lending market is undergoing a period of extreme change and intense competition,” Comyn said, before going to explain how banks were brawling over a smaller pool of new loans, and position for a surge in refinancing as we approach the so-called fixed-rate cliff, whereby almost one million borrowers need to switch from very cheap fixed-rate loans to expensive, variable ones.
One can calmly observe that the music is about to stop but there is no stopping dancing before it does. Not even for CBA.
I duly obliged my CBA callers and punched them in the face on the interest rate.
Needless to say, multiplying this experience by a million is not good for earnings. And it appears the market is finally realising it:
However, CBA is still massively over-valued, trading on 16.2x NTM for no apparent reason at all. Based on its peer group, it should be 10-12x: 
There is so much room for further Aussie bank retrenchment it takes the breath away:
Finally, margins are only half of the problem. There are arrears and, before long, provisions to worry about. The COVID credit cycle has been very kind to CBA but it has turned and the only way is up for defaults from here:
The CBA bubble is in trouble…
